Stokely-Van Camp, Inc. v. State

• Decision Date: 27 June 1957
• Docket Number: No. 34044,STOKELY-VAN,34044
• Citation: 50 Wn.2d 492,312 P.2d 816
• Parties: CAMP, Inc., a corporation of the State of Indiana, Respondent, v. STATE of Washington, Appellant.
• Court: Washington Supreme Court

Page 492

50 Wn.2d 492

312 P.2d 816

STOKELY-VAN CAMP, Inc., a corporation of the State of Indiana, Respondent, v. STATE of Washington, Appellant.

No. 34044.

Supreme Court of Washington, En banc.

June 27, 1957.

Don Eastvold, Robert L. Simpson, Olympia, John J. O'Connell, Atty. Gen., for appellant.

Howe, Davis, Riese & Jones, Seattle, for respondent.

DONWORTH Justice.

The question for our decision is whether respondent is liable for payment of the business and occupation tax as a manufacturer, as defined in RCW 82.04.110 and 82.04.120.

Respondent paid, under protest, the tax as assessed by the tax commission of the state of Washington, and sued the state to recover the amount thereof. At the trial the parties filed a stipulation containing the agreed facts. After argument the trial court made its findings of fact and conclusions of law upon the basis of which it entered judgment for respondent in the sum of $20,809.95. The state has appealed, and by its assignments of error raises only the question of law stated above.

The word respondent is used herein to include Stokely-Van Camp, Inc., and also its predecessor in interest, Pictsweet Foods, Inc., as though there had been no merger of those corporations.

Prior to March 1, 1954, respondent paid its business and occupation tax, under RCW 82.04.270, as a wholesaler. On that date, the tax commission of the state of Washington (herein called the commission) revised its Rule No. 136, by adding to the definition of the term 'to manufacture' the following:

'It includes also the preparation and freezing of fresh fruits and vegetables.'

Shortly thereafter, the commission levied the business and occupation tax against respondent on the basis that it was a manufacturer within the meaning of the taxing statute (RCW 82.04.220 and 82.04.240), and ceased to tax respondent as a wholesaler.

Respondent at all times material to this case has been engaged in the business of preparing fresh fruit and vegetables for packaging and freezing and thereafter packaging and freezing them and selling these products at wholesale.

Respondent's preparation of the fruit and vegetables prior to freezing is described in considerable detail in the stipulation of the facts. The work done with respect to the various items is stated therein as follows:

'1. Asparagus Cuts--are sorted, cleaned, butted, cut and blanched.

'2. Asparagus Spears--are sorted, cleaned and butt-cut to correct length, and blanched.

'3. Broccoli--is cleaned, cut and trimmed and blanched.

'4. Carrots--are sorted, cleaned, diced and blanched.

'5. Cauliflower--is sorted, cleaned, cut, trimmed and blanched.

'6. Corn--is husked, cut from the cob, blanched and cleaned.

'7. Cob Corn--is husked, cobs are trimmed, cleaned and blanched.

'8. Composite Products (mixed vegetables, peas and carrots, succotash)--are mixtures of frozen individual items, processed as herein described, and merely packed and packaged as mixed components.

'9. Green Beans--are sorted, cleaned, snipped, cut and blanched.

'10. Lima Beans--are processed the same as peas.

'11. Peas--after being vined and podded, and sorted and cleaned, are blanched, quality graded and sorted for condition.

'12. Potatoes--are sorted, cleaned, trimmed and cut, water blanched and oil blanched.

'13. Raspberries--with the exception of slicing, are processed the same as strawberries, except that sugar is added, in syrup form, to compensate for the variable sugar content of the berries.

'14. Rhubarb--is sorted, cleaned and cut, blanched, and sugar added to prevent oxidation and preserve texture.

'15. Strawberries--are sorted and cleaned, sliced and varying amounts of sugar are added (compensating variable sugar content of the berries) to prevent oxidation and to preserve their natural texture.'

The important part of the preparation process which is used on all items except rhubarb and berries is known as blanching. This is described in the stipulation as follows:

'Blanching is a very important and essential part of the preparation of fresh vegetables for freezing. It is to be distinguished from cooking. The purpose of blanching is not to cook the vegetables and render them edible, but is to inactivate the enzymes, inhibit off-flavors, retain vitamins, and fix color.

'Blanching, as known to the frozen food industry and to plaintiff's business of preparing fresh vegetables for freezing, consists in heating the vegetables in steam or hot water. Properly conducted, it substantially inactivates enzymes which would otherwise cause the development of off-flavors and losses of color and vitamins C and A during cold storage. Moreover, it fixes the characteristic color of the vegetable.

'Blanching, as distinguished from conventional cooking, should not be carried out for a period long enough to render the vegetable in edible form, and it is not so done by plaintiff. Frozen precooked vegetables, as a rule, do not keep as well in cold storage as do those which have been properly blanched.

'Heat is the best of the known methods of destroying enzymes. The enzymes of peas, which could cause deterioration of the frozen product, are sufficiently inactivated to warrant freezing and safe storage without great loss in quality when 90% of the respiration activity has been destroyed. Plaintiff reaches this point by blanching for ninety seconds at 250~F.

'It is important, as plaintiff does, to blanch vegetables promptly after harvesting in order to stop objectionable enzyme actions which cause serious losses of sweetness and flavor and other changes which may occur. Moreover, peas and lima beans must be blanched immediately after vining if the effects of the bruising they have received in the vining are to be minimized.

'Blanching also stops the deterioration of the vegetables which occurs after harvesting because of respiration. It, in effect, sterilizes the vegetables and markedly retards the rate of loss of vitamins C and A. The blanching of vegetables not only retards undesirable changes before freezing, but inhibits the development of off-flavors during cold storage and thawing and enhances the general keeping qualities of the food item.'

Certain items are packaged before freezing and others are frozen before packaging. The former are placed in cold chambers where a wind blast at below zero temperature is blown over the packages for about three hours. Unpackaged items are moved through a tunnel on woven metal mesh for about sixty feet where a wind blast of similar temperature is blown on them for approximately twenty-five minutes, after which they are dropped on a return belt.

Appellant's first assignment of error is directed to the following conclusion of law entered by the trial court:

'The activities of the plaintiff in preparing and freezing fresh fruits and vegetables does not constitute manufacturing as the term 'to manufacture' is defined in RCW 82.04.120 and that plaintiff is not a 'manufacturer' as defined in RCW 82.04.110 and that the plaintiff is not subject to the tax upon manufacturing in RCW 82.04.240.'

In order to decide whether the activities of respondent, which we have described above, subject it to the business and occupation excise tax levied on a manufacturer, it is necessary to examine the pertinent statutory definitions. RCW 82.04.110 defines the term 'manufacturer' as follows:

"Manufacturer' means every person who, either directly or by contracting with others for the necessary labor or mechanical services, manufactures for sale or for commercial or industrial use from his own materials or ingredients any articles, substances or commodities. When the owner of equipment or facilities furnishes, or sells to the customer prior to manufacture, all or a portion of the materials that become a part or whole of the manufactured article, the tax commission shall prescribe equitable rules for determining tax liability.'

The definition of the phrase 'to manufacture' is contained in RCW 82.04.120, reading:

"To manufacture' embraces all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different or useful article of tangible personal property or substance of trade or commerce is produced and shall include the production or fabrication of special made or custom made articles.'

The statutory provision levying the tax is found in RCW 82.04.220, and the rate of tax (one fourth of one per cent of the value of the products and by-products manufactured) was fixed in RCW 82.04.240. By amendment in 1953 (Chapter 93, Laws of 1953), the rate was increased by surtax to three-tenths of one per cent.

The decision of this controversy must be arrived at by an interpretation of the language of the statutes defining 'manufacturer' and the phrase 'to manufacture' as applied to respondent's activities. Dictionary definitions and judicial decisions from other states are not of much assistance because, as we said in North Pacific Coast Freight Bureau v. State, 12 Wash.2d 563, 122 P.2d 467, 470, quoting with approval from Fisher's Blend Station v. State Tax Commission, 182 Wash. 163, 45 P.2d 942:

"Statutes providing for the raising of revenue required by the state in carrying on its functions are vital to its welfare, and a person, natural or artificial, should not be declared exempt from the payment of a tax required of business generally, unless it clearly appears that the constitution and laws of the United States (or of the state) require such exemption."

Three decisions of this court bearing upon these statutory definitions are cited by appellant: Drury the Tailor v. Jenner 12 Wash.2d 508, 122 P.2d 493; J. & J. Dunbar & Company v. State, 40 Wash.2d 763, 245 P.2d 1164; C. V. Wilder Co. v. State, 48 Wash.2d 834, 297 P.2d 241.

In the first case mentioned, the taxpayer was a custom tailor who was engaged in fabricating cloth for customers and making it into a suit...